ERBIL, Kurdistan Region - Iraq’s Central Bank (CBI) on Wednesday implemented new exchange rates for the Iraqi dinar following a cabinet decision the previous day to devalue the currency, raising the official end-user rate from 1,320 dinars per US dollar to 1,520.
The Iraqi Council of Ministers approved the change on Tuesday, with the CBI saying the adjustment was intended to meet the financial requirements of the state budget amid difficult economic and financial conditions.
Under the new rates, the CBI will purchase dollars from the Finance Ministry at 1,500 dinars per dollar and sell them to banks at 1,510 dinars, while the cash dollar selling rate to the public will stand at 1,520 dinars.
The CBI said in a statement the measures were part of its and the federal government’s commitment to “achieving sustainable economic stability and ensuring comprehensive development.”
It said the adjustment would support domestic production and local industry by facilitating “fair competition” between Iraqi goods and imported products, while encouraging investment in non-oil productive sectors and creating jobs.
The devaluation helps bridge the budget deficit by allowing the government to get more dinars for each dollar it sells.
Iraq’s public finances are heavily dependent on oil revenues, which before this year’s export disruption at the Strait of Hormuz accounted for more than 90 percent of state revenues.
The US-Israeli war on Iran, which began on February 28, severely disrupted shipping through the strategic waterway through which most of Iraq’s crude was exported before the conflict.
Iraq’s crude exports fell from more than 99 million barrels in February to around 18.6 million barrels in March. By August, exports had recovered to around 73.7 million barrels, but remained below pre-war levels. The disruption has sharply reduced oil revenues and increased Iraq’s fiscal shortfall.
Iraq relies on the US dollars it earns from oil sales to finance imports and help stabilize the dinar.
“The Central Bank of Iraq reassures citizens and the entire economic sector of the adequacy and strength of its foreign reserves, which guarantee the full and immediate fulfilment of all foreign transfer requests to finance trade, settle bank cards, and provide cash sales to travelers without any restrictions,” the statement said.
One US dollar traded for around 1,680 Iraqi dinars in Erbil’s parallel exchange market as of Wednesday afternoon
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